Drive Shack Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING (Tables)

SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 2017

Summary financial data on the Company’s segments is given below, together with a reconciliation to the same data for the Company as a whole:



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Six Months Ended June 30, 2017
Revenues
Golf course operations	$	106,935		$	—		$	—		$	—		$	106,935
Sales of food and beverages	33,566			—			—			—			33,566
Total revenues	140,501			—			—			—			140,501
Operating costs
Operating expenses (A)	120,295			50			—			—			120,345
Cost of sales - food and beverages	10,041			—			—			—			10,041
General and administrative expense	1,444			143			—			2,278			3,865
General and administrative expense - acquisition and transaction expenses (B)	486			2,319			—			117			2,922
Management fee to affiliate	—			—			—			5,354			5,354
Depreciation and amortization	11,765			—			—			—			11,765
Impairment	—			—			32			—			32
Realized and unrealized loss on investments	285			—			6,391			—			6,676
Total operating costs	144,316			2,512			6,423			7,749			161,000
Operating loss	(3,815		)	(2,512		)	(6,423		)	(7,749		)	(20,499		)
Other income (expenses)
Interest and investment income	72			—			14,052			159			14,283
Interest expense (C)	(7,670		)	—			(2,050		)	(845		)	(10,565		)
Other (loss) income, net	(834		)	—			1,004			—			170
Total other income (expenses)	(8,432		)	—			13,006			(686		)	3,888
Income tax expense (D)	—			—			—			1,049			1,049
Net (loss) income	(12,247		)	(2,512		)	6,583			(9,484		)	(17,660		)
Preferred dividends	—			—			—			(2,790		)	(2,790		)
(Loss) income applicable to common stockholders	$	(12,247	)	$	(2,512	)	$	6,583		$	(12,274	)	$	(20,450	)

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Three Months Ended June 30, 2017
Revenues
Golf course operations	$	60,639		$	—		$	—		$	—		$	60,639
Sales of food and beverages	20,721			—			—			—			20,721
Total revenues	81,360			—			—			—			81,360
Operating costs
Operating expenses (A)	65,864			50			—			—			65,914
Cost of sales - food and beverages	6,009			—			—			—			6,009
General and administrative expense	744			77			—			1,133			1,954
General and administrative expense - acquisition and transaction expenses (B)	210			1,058			—			—			1,268
Management fee to affiliate	—			—			—			2,677			2,677
Depreciation and amortization	5,972			—			—			—			5,972
Impairment	—			—			32			—			32
Realized and unrealized loss on investments	165			—			3,122			—			3,287
Total operating costs	78,964			1,185			3,154			3,810			87,113
Operating income (loss)	2,396			(1,185		)	(3,154		)	(3,810		)	(5,753		)
Other income (expenses)
Interest and investment income	33			—			6,250			112			6,395
Interest expense (C)	(3,853		)	—			(844		)	(434		)	(5,131		)
Other (loss) income, net	(210		)	—			503			—			293
Total other income (expenses)	(4,030		)	—			5,909			(322		)	1,557
Income tax expense (D)	—			—			—			510			510
Net (loss) income	(1,634		)	(1,185		)	2,755			(4,642		)	(4,706		)
Preferred dividends	—			—			—			(1,395		)	(1,395		)
(Loss) Income applicable to common stockholders	$	(1,634	)	$	(1,185	)	$	2,755		$	(6,037	)	$	(6,101	)



	Traditional Golf		Entertainment Golf		Debt Investments (E)		Corporate			Total
June 30, 2017
Investments	$	276,759	$	3,250	$	404,025	$	—		$	684,034
Cash and restricted cash	14,483		3,928		409		104,548			123,368
Other assets	34,562		3,012		2,972		495			41,041
Total assets	325,804		10,190		407,406		105,043			848,443
Debt, net	116,131		—		307,689		51,212			475,032
Other liabilities	166,453		2,777		1,164		3,757			174,151
Total liabilities	282,584		2,777		308,853		54,969			649,183
Preferred stock	—		—		—		61,583			61,583
Noncontrolling interest	—		—		—		—			—
Equity attributable to common stockholders	$	43,220	$	7,413	$	98,553	$	(11,509	)	$	137,677

Additions to investments in real estate during the six months ended June 30, 2017	$	6,834	$	2,254	$	—	$	—		$	9,088

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Six Months Ended June 30, 2016
Revenues
Golf course operations	$	111,469		$	—		$	—		$	—		$	111,469
Sales of food and beverages	35,173			—			—			—			35,173
Total revenues	146,642			—			—			—			146,642
Operating costs
Operating expenses (A)	126,419			—			—			—			126,419
Cost of sales - food and beverages	11,113			—			—			—			11,113
General and administrative expense	1,544			2			38			3,666			5,250
General and administrative expense - acquisition and transaction expenses (B)	1,011			228			—			171			1,410
Management fee to affiliate	—			—			—			5,351			5,351
Depreciation and amortization	12,515			—			—			—			12,515
Impairment	—			—			2,953			—			2,953
Realized and unrealized loss on investments	19			—			3,450			—			3,469
Total operating costs	152,621			230			6,441			9,188			168,480
Operating loss	(5,979		)	(230		)	(6,441		)	(9,188		)	(21,838		)
Other income (expenses)
Interest and investment income	77			—			41,375			8			41,460
Interest expense (C)	(5,363		)	—			(19,077		)	(1,511		)	(25,951		)
Gain on deconsolidation	—			—			82,130			—			82,130
Other (loss) income, net	(273		)	—			1,107			—			834
Total other income (expenses)	(5,559		)	—			105,535			(1,503		)	98,473
Income tax expense	182			—			—			—			182
Net (loss) income	(11,720		)	(230		)	99,094			(10,691		)	76,453
Preferred dividends	—			—			—			(2,790		)	(2,790		)
Net loss attributable to noncontrolling interest	12			—			—			—			12
(Loss) income applicable to common stockholders	$	(11,708	)	$	(230	)	$	99,094		$	(13,481	)	$	73,675

Summary segment financial data (continued).



	Traditional Golf			Entertainment Golf			Debt Investments			Corporate			Total
Three Months Ended June 30, 2016
Revenues
Golf course operations	$	62,872		$	—		$	—		$	—		$	62,872
Sales of food and beverages	21,612			—			—			—			21,612
Total revenues	84,484			—			—			—			84,484
Operating costs
Operating expenses (A)	68,200			—			—			—			68,200
Cost of sales - food and beverages	6,516			—			—			—			6,516
General and administrative expense	705			1			1			1,782			2,489
General and administrative expense - acquisition and transaction expenses (B)	884			216			—			134			1,234
Management fee to affiliate	—			—			—			2,676			2,676
Depreciation and amortization	6,484			—			—			—			6,484
Impairment	—			—			645			—			645
Realized and unrealized loss on investments	19			—			1,443			—			1,462
Total operating costs	82,808			217			2,089			4,592			89,706
Operating income (loss)	1,676			(217		)	(2,089		)	(4,592		)	(5,222		)
Other income (expenses)
Interest and investment income	36			—			20,382			3			20,421
Interest expense (C)	(2,698		)	—			(9,153		)	(566		)	(12,417		)
Other income, net	11			—			503			—			514
Total other income (expenses)	(2,651		)	—			11,732			(563		)	8,518
Income tax expense	138			—			—			—			138
Net (loss) income	(1,113		)	(217		)	9,643			(5,155		)	3,158
Preferred dividends	—			—			—			(1,395		)	(1,395		)
Net (income) attributable to noncontrolling interest	(112		)	—			—			—			(112		)
(Loss) income applicable to common stockholders	$	(1,225	)	$	(217	)	$	9,643		$	(6,550	)	$	1,651

(A)

Operating expenses includes rental expenses recorded under operating leases for carts and equipment in the amount of $0.8 million and $1.6 million for the three and six months ended June 30, 2017, respectively, and $1.0 million and $1.9 million for the three and six months ended June 30, 2016, respectively. Operating expenses also includes amortization of favorable and unfavorable lease intangibles in the amount of $1.1 million and $2.1 million for the three and six months ended June 30, 2017, respectively, and $1.1 million and $2.3 million for the three and six months ended June 30, 2016, respectively. In addition, straight-line rent associated with our Entertainment Golf venues is included in operating expenses.


(B)	Acquisition and transaction expenses include costs related to completed and potential acquisitions and transactions which may include advisory, legal, accounting, valuation and other professional or consulting fees. Transaction expenses also include personnel and other costs which do not qualify for capitalization associated with the development of new Entertainment Golf venues.


(C)	Interest expense includes the accretion of membership deposit liabilities in the amount of $1.6 million and $3.2 million for the three and six months ended June 30, 2017, respectively, and $1.4 million and $2.9 million for the three and six months ended June 30, 2016, respectively.


(D)	Effective January 1, 2017, the Company revoked its election to be treated as a REIT. As a result, the Company is subject to U.S. federal corporate income tax and the provision for income taxes is recorded in the corporate segment.


(E)	The following table summarizes the investments and debt in the Debt Investments segment:



	June 30, 2017
	Investments				Debt
	Outstanding Face Amount		Carrying Value		Outstanding Face Amount		Carrying Value
Unlevered real estate securities	$	4,000	$	2,114	$	—	$	—
Levered real estate securities	310,713		319,184		307,689		307,689
Real estate related and other loans (F)	81,790		62,708		—		—
Other investments	N/A		20,019		—		—
	$	396,503	$	404,025	$	307,689	$	307,689


(F)	Excludes two mezzanine loans with zero carrying value, which had an aggregate face amount of $17.8 million and two corporate loans with zero carrying value, which had an aggregate face amount of $45.7 million.

Schedule of other debt segment investments and debt

The following table summarizes the investments and debt in the Debt Investments segment:



	June 30, 2017
	Investments				Debt
	Outstanding Face Amount		Carrying Value		Outstanding Face Amount		Carrying Value
Unlevered real estate securities	$	4,000	$	2,114	$	—	$	—
Levered real estate securities	310,713		319,184		307,689		307,689
Real estate related and other loans (F)	81,790		62,708		—		—
Other investments	N/A		20,019		—		—
	$	396,503	$	404,025	$	307,689	$	307,689


(F)	Excludes two mezzanine loans with zero carrying value, which had an aggregate face amount of $17.8 million and two corporate loans with zero carrying value, which had an aggregate face amount of $45.7 million.